The year 2023 ended with a mixed bag of hopes and frustrations for Southeast Asian countries. The region had left the Covid-19 pandemic behind, but geopolitical tensions such as the ongoing Russia-Ukraine war and the Israel-Hamas war, as well as the subdued performance of the Chinese economy, cast a long shadow over the region's aspirations for a robust post-pandemic recovery. Many countries in the region are currently undergoing leadership transitions, ranging from post-election political consolidation to active campaigning for upcoming elections. Geopolitical tensions between the United States and China, along with the pressure to take sides, are significant sources of concern for many Southeast Asian governments. But foremost among the priorities of Southeast Asian policymakers are efforts to curb inflation, transition towards a more sustainable economic growth model—including by diversifying away from the oil and gas sector and embracing EV industries—and enhance national competitiveness to capitalize on the next wave of FDI diversification from China.

Political Developments

After and Before the Votes: Political Transitions in Malaysia, Thailand, the Philippines, Cambodia, Timor-Leste, Singapore and Indonesia

A number of Southeast Asian states—Malaysia, Thailand, the Philippines, Cambodia and Timor-Leste—were in the process of political consolidation after leadership transitions resulting from elections in 2022 and 2023.

In Malaysia, there was relative political stability after five years of frequent changes of government. National politics was dominated by Prime Minister Anwar Ibrahim and partisan skirmishes over race and religion, as noted by Ariel Tan in her Malaysia overview chapter. The main challenges facing the prime minister were to deliver on his reform agenda, win more Malay support while retaining non-Malay support, and improve the economy. In the six state elections in August, the ruling coalition successfully defended the states under its rule as well as three parliamentary seats but saw an erosion of Malay support. As such, the government enjoyed a strong majority in parliament. However, approval ratings for Anwar and the government declined significantly in 2023 stemming from public concerns about the economy, especially the higher cost of living.

In Thailand, the political divide between the Thaksin-led Pheu Thai Party and the conservative establishment centred on the military and the monarchy, which has been the major source of political instability since 2006, was bridged surprisingly by an alliance between the two. This new alignment, as described by Napon Jatusripitak, reflects a return to old politics driven by the shared interests and common adversaries of the elites, particularly vis-à-vis the Move Forward Party (MFP) and the broader pro-democracy movements. Long-term stability is by no means guaranteed as this delicate balance will face tests. The electoral victory of the MFP—and the denial of its premiership position following Pheu Thai's decision to collaborate with the conservative establishment—underscored the ideological differences in the country over the role of the monarchy and the military. This structural tension in Thai politics will continue to simmer below the surface. These changes have occurred at a time when the economy is vulnerable because of external economic and geopolitical factors, which adds to the uncertainties facing the country going forward.